There had been rumors that Pentagon Federal Credit Union (PenFed) was going to finally start offering 10-year certificates to all members in January. A reader reported that he was told by a CSR the yield would be 3.00%. I wasn't able to confirm this 10-year CD last week, and there isn't any mention of this new CD at PenFed's website. New January rates are posted with no mention of a 10-year CD or IRA CD.
There is some good news with PenFed's January rates. First, the 1-year CD yield has increased from 0.99% to 1.16% APY. This is the first time that I can remember that PenFed has been offering a competitive 1-year CD rate. In the past PenFed's competitive rates have been for terms from 3 years to 7 years. Unfortunately, a mildly competitive 1-year CD is a disappointment for many who don't see much value in short-term CDs in today's awful interest rate environment.
The other bit of good news is that PenFed has kept its competitive long-term CD rates. These rates have held up since March 2011 while other banks and credit unions have cut rates. Below are PenFed's CD yields as listed in PenFed's Money Market Certificates page as of 1/2/2012.
- 2.75% APY 7-year CD & IRA CD
- 2.25% APY 5-year CD & IRA CD
- 2.00% APY 4-year CD & IRA CD
- 1.50% APY 3-year CD & IRA CD
- 1.25% APY 2-year CD & IRA CD
- 1.16% APY 1-year CD & IRA CD
Minimum deposit is $1,000. The rates are also available in an IRA. Even though PenFed typically maintains CD rates through the month, they no longer guarantee it. For more details about PenFed CDs, please refer to my PenFed CD review.
There's one thing that happened that has made PenFed's 5-year CD less competitive is a larger early withdrawal penalty. The penalty now matches the 7-year EWP: up to 365 days of interest. Note, the penalty doesn't eat into the principal so if you redeem the CD before 365 days from the issue date, you'll just lose all of the accrued interest. Please refer to PenFed's disclosure.
It should be noted that PenFed did the honorable thing in how it changed the EWP. The change applied only to new CDs or CDs that were rolled over. It did not apply to existing CDs. Not all credit unions have done this.
PenFed makes it easy for anyone to join and open accounts online. If you don't qualify based on military, employer or family, you can become eligible by joining the National Military Family Association (one-time $20 fee) or by joining the Voices for America's Troops (one-time $15 fee). Joining one of these organizations and joining PenFed can be done at the same time all online. Please refer to PenFed's How to Join Overview Page for details.
Accounts can be opened online, but for those who prefer opening accounts in an office, PenFed has branches in several parts of the country including Washington DC, Maryland, Virginia, New Jersey, New York, Colorado, North Carolina, Hawaii, Puerto Rico, Missouri and Texas.
PenFed is the third largest credit union in the nation. It has $12 billion in deposits. PenFed has an overall health score at DepositAccounts.com of 5 stars (out of 5) with a Texas Ratio of 5.04% (excellent) based on September 2011 data. Please refer to our financial overview of Pentagon Federal Credit Union for more details. It's federally insured by the NCUA (Charter # 227).
History of PenFed's 10-Year CDs
In August 2010, PenFed offered a CD promotion to limited members with CDs maturing in October 2010. The promotion included a 5.00% 10-year CD. Members were given the chance to roll over maturing CDs into this 5% 10-year CD or other competitive long-term CDs in January 2011. A glitch in PenFed's systems allowed more members and money to participate in this program.
When this promotion was announced, my PenFed contact told me they had tentatively planned to launch 10-year certificates for all members in January 2011. The yield wouldn't be 5%, but it would likely be higher than the 7-year CD yield.
The 10-year CD release was put on hold for all of 2011. My guess is that the interest rate environment was a surprise to them. They probably did not think rates would fall as low and as long as they did. With Treasury yields continuing to fall, perhaps they once again put a hold on the 10-year CD release. Many of us are making good money on those 5% 10-year CDs, but PenFed is probably losing money on them. As a comparison, the best nationally available 10-year CD yield currently available is only 2.70% APY at Apple FCU. The highest at a bank is 2.50% APY at Discover Bank.
Searching for the Best CD Rates
To search for the best nationwide rates and the best rates in your state, please refer to the following tables at DepositAccounts.com: